Yesterday we discussed how the Black Plague of the 14th century contributed to the rise of economic and political freedom. Today I want to discuss how the COVID pandemic is contributing to the loss of economic and political freedom.
Again, the Black Death led to a massive labor shortage, which drove up the economic power of individual workers, and to the decimation of the feudal elite, which led to the decentralization of power, with peasants and city-dwellers electing their own leaders.
COVID, which is far less fatal, has also led to a labor shortage and to the consequent rise of wages. But notice the difference. The labor shortage this time is caused not by the death of millions but by people leaving the workforce, either voluntarily or because of government-imposed lockdowns. We now face the additional prospect of the labor shortage getting even worse because of vaccine mandates, either from governments or from private companies, as large numbers of workers in key sectors are vowing to quit their jobs rather than get vaccinated.
But the wage gains from the labor shortage are being cancelled by the surge of inflation. According to the Econ 101 textbook explanation, inflation comes from too much money chasing too few goods. Productivity is down because of the world-wide lockdowns, as well as the labor shortage. But the government has been pouring money into the economy, beginning with $4 trillion-dollar bailouts and continuing with the recently-passed trillion dollar infrastructure bill, with an additional $2 + trillion social infrastructure bill waiting in the wings.
Incredibly, President Biden is describing his infrastructure bills as inflation fighters because they will put more money in people’s hands. But that cannot stem inflation. Another way of looking at inflation is high demand coupled with low productivity. Deficit spending and printing money unconnected to productivity simply devalues the currency. A big part of the social infrastructure bill aims at restricting and eventually eliminating fossil fuel, which will make energy prices skyrocket. Instead, the bill hopes to promote electric vehicles, regardless of consumer demand for them. And the higher taxes the bills include, though they will not be enough to pay for the programs, will take money out of the productive economy.
My point is that whereas the aftermath of the Black Plague led to economic growth and increased prosperity–by unleashing the laws of free market economics–the aftermath of the COVID pandemic is defying the laws of free market economics and can only put a leash on long-term prosperity.
As for political freedom, over the last two years, we have all felt the weight of government’s coercive power as never before. During the initial lockdown, the government–yes, under Donald Trump–forbade us from going to work, going to church, and even leaving our homes. I can’t recall any government presuming to exert control over its citizens to that extent. You could argue that such actions were necessary to stem the pandemic, but, even if they were, the sheer imposition of state power was enormous.
Also contributing to the rise of unlimited government as a result of the pandemic were the above bailouts. For the first time, the government gave vast amounts of money directly to its citizens, extending the social safety net not just to the disadvantaged but to everyone. Again, maybe this was necessary and a good policy, a compensation to businesses for being shut down and to the public for not being allowed to go to work. I’m just saying that this largesse, justified or not, greatly expanded the role of government, as well as the willingness of citizens to accept that expanded role. The subsequent multi-trillion dollar infrastructure bills would have been unthinkable without the recent multi-trillion dollar bailouts.
The researchers I quoted in yesterday’s post conclude that because the COVID pandemic was so much less severe than the Black Plague, the socio-economic effects will be temporary, not historic. Let’s hope and pray that this is the case. Already a backlash seems to be setting in against the government’s overreach and its counter-productive attempts to control the economy. Perhaps our experience with COVID can serve as an inoculation against our political, economic, and cultural plagues.